Religare To Sell Entire Stake In Religare Finvest  To TCG Advisory Services
Indian five hundred rupee banknotes are arranged for a photograph in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)  

Religare To Sell Entire Stake In Religare Finvest To TCG Advisory Services

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Religare Enterprises Ltd. is selling its entire stake in non-banking financial company arm Religare Finvest Ltd. to TCG Advisory Services for around Rs 330 crore, according to a regulatory filing on Wednesday.

Religare Enterprises in the filing said that a share purchase agreement has been signed with TCG for selling stake in RFL, which is an small and medium-sized enterprises-focused NBFC and also owns a majority shareholding in housing finance provider Religare Housing Development Finance Corporation Ltd.

REL in July 2019 had signed a binding term sheet with TCG Advisory Services to sell its NBFC and housing finance businesses.

According to the filing, REL is divesting its entire stake in RFL for Rs 330 crore. The transaction is subject to receipt of statutory and regulatory approvals and fulfillment of other conditions. It is expected to complete before Dec. 31.

"The consideration will be utilised to repay the outstanding loans to group companies, third parties and for other general corporate purpose," the filing said.

REL in a release also announced settlement of a dispute with Axis Bank Ltd. which was "restraining" the capital raise plans in its various group companies.

The company was mired in controversies in the past due to alleged financial mismanagement by promoters Malvinder and Shivinder Singh,.

"Currently the promoter stake has reduced to around 1 percent in the company and REL has applied for declassifying them as promoters. The company is now majority owned by a set of institutional investors and family offices, governed by an independent board and a new management is trying to turnaround the fortunes of the group," REL said in the release.

The NBFC arm Religare Finvest is now being headed by a new management team under Sanjay Palve, as the Managing Director and Chief Executive Officer of the company.

Palve also heads the housing finance subsidiary Religare Housing Development Finance Company of the Religare group.

Religare said that in last one year, the new team has done the cleanup of books, improved corporate governance and strengthened the internal processes/risk management.

"The company which was put under Reserve Bank of India’s Corrective Action Plan, restraining it from further lending activity, is in advanced stages of restructuring its debt and improve capital ratios to come out of CAP restriction from RBI," it added.

Unlike many of its peers, it is able to keep its account standard with banks despite having asset liability mismatch and RBI cap restrains.

"The revival of Religare Finvest will set an example in the NBFC sector. With TCG coming in as a promoter shareholder, we have strong backing of capital and long term commitment towards business. Our lenders are also positive to complete the restructuring of debt to ensure sustainable growth of company and their interest," Palve said.

Religare Finvest, which is attempting a business revival along with restructuring of its debt, requires sustained capital commitments, Religare said.

"The divestment of our NBFC business will help conserve capital for the company and allow us to focus on other businesses of the group. It's a win-win deal for REL and TCG, who can help grow the NBFC business with a long term capital commitment," said Nitin Agarwal, Group Chief Financial Officer, REL and CEO, Religare Broking Ltd..

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